The errors and omissions liability coverage sector is starting to feel the pinch in the real estate industry as a result of the financial crisis.
Trends and developments impact the purchasers of the different kinds of specialty insurance products, such as errors and omissions, D&O, cyber risk, employment practices liability, surplus, marine, and transportation lines.
Firms for diversified financial services and banking that have advised their customers to make investments into high risk subprime mortgages or credit default swaps are now experiencing significant claims, and – according to Phil Norton – many of them are still in operation. Norton is the president of the professional liability division of the Chicago based firm called Arthur J. Gallagher & Co. Norton said for some of the claims, the defense expenses have already reached the $10 million mark.
Senior vice president and head of the professional lines for the American wholesale insurance operations of Endurance Specialty Holdings Ltd., Gene Mason, said that the direct exposure risks to the financial crisis aren’t as easy to identify. This includes appraisers, title agents, some property managers, and escrow agents.
Mason provided the example of title agents. He said that while they “historically did not have a lot of claim activity,” but as a result of the real estate crisis, they may face challenges by being incapable of doing anything more than online checks to see if there have been any liens on a property where local officials may not yet have inputted the information due to growing backlogs.